EARLY EXIT: Bartertown founder brings radical approach to starting — and exiting — local business

GRAND RAPIDS — A mere 15 months after launching an offbeat diner in downtown Grand Rapids, owner Ryan Cappelletti has reached the enviable position where he can hand over the keys to his fellow workers.

He’s not just looking for a few weeks’ vacation away from the heat of the kitchen, though. Next month, Cappelletti plans to transfer 100-percent ownership of the vegan and vegetarian Bartertown Diner in Grand Rapids to the 16 employees who work there. The transition will allow him to focus on his next startup venture, Cult Pizza, which he plans to open a couple of doors down from the diner.

Don’t confuse this transaction for an employee stock ownership plan (ESOP) or management buyout (MBO) that’s designed to financially reward a successful owner as he steps away from the business. In fact, as Cappelletti transitions from Bartertown, he’s not looking for any money to change hands. Instead, he plans to give the company to the collective of workers he’s worked alongside and helped train in all aspects of the operation. His only condition: to set up the transfer in a way that ensures the diner’s longevity as a worker-run organization.

If the upcoming non-liquidity event sounds nutty and bit unconventional, it just might be. Still, Bartertown’s move from startup to second stage provides an interesting example of how a small-but-growing group of young entrepreneurs are bringing a radical approach to business in West Michigan. They’re using social media and crowdfunding sites like Kickstarter.com to raise awareness and money, as well as lower-tech business practices like materials scavenging, bartering, collaboration and tons of elbow grease to get the doors open quickly so they can start selling. They eschew business plans and detailed financial projections in favor of vision and values. Above all, they take the old “benevolent dictator” management model and turn it on its head, creating democratic workplaces where everyone is the CEO of something.

Spark a revolution

A punk rock musician in his spare time, Cappelletti brings some of the traditional punk ethos to his startups, including a do-it-yourself (DIY) work ethic, loads of passion and a low tolerance for bullshit. A self-described peaceful anarchist, he’s an unlikely entrepreneur with an unconventional streak and a sense of humor.

That personality mix is immediately apparent to anyone walking into the 1,100-square-foot diner at 6 Jefferson Avenue. The strikingly red south wall features murals depicting, among other images, Marxist revolutionary Che Guevara in an apron and a cheeky take on the traditional symbol of solidarity and resistance – a clenched fist holding two spears of asparagus. The message seems to be this: A revolution is coming and it’s starting in the stomachs of satisfied customers.

“I just want people to remember this as the best meal they ever had, and they got it from hard-working, honest people,” he said.

Bartertown employees are involved in all aspects of the business from working the line to filling out purchase orders to reviewing the books. They use their individual talents for the company’s advantage and develop a trade. The day’s chef even picks a portion of the menu based on what fresh food is available and what he or she wants to cook that day.

“When you’re building a business, you want to build your workers up,” he said. “You want them to have a sense that this is their restaurant, too.”

It’s not a model that would work everywhere, admits Cappelletti. He acknowledges that he and his fellow workers – all members of the Industrial Workers of the World Union – blazed their own path in developing Bartertown’s concept.

For example, they signed a lease and started renovating the building before they had any of the financing or equipment lined up – oven, cooler, tables and chairs included. They raised money by hosting fundraiser concerts with punk bands, selling t-shirts and by catering a few small events. Later, they raised more than $11,000 toward the startup on Kickstarter.com, a crowdfunding site where people can raise money for projects and businesses. As the money trickled in, they bought equipment and paint and started the renovations. They recruited friends, family and friends-of-friends to help with the carpentry and electrical work, and to create the cheeky and controversial mural on the wall. They cobbled together an eccentric décor – tables made from old doors, mix-matched utensils and settings – and used equipment, including a $700 oven salvaged from an old church. The process was hardly the stuff of B-school textbooks.

“The fact of the matter is we never followed a model. We just came up with a concept that worked for us,” said Cappelletti, who makes his living as a cook at the restaurant. “Now over a year later, we are making it, so I guess we are doing something right.”

Who steers the ship?

Certainly, employee-owned companies are nothing new. Michigan has more than 300 worker-owned companies, according to the Michigan Department of Career Development website. Most of those businesses are set up through Employee Stock Ownership Plans, a special type of tax-qualified benefit plan designed to invest in the stock of the sponsoring employer. While smaller firms are potentially eligible for this plan, businesses with more than 25 employees and payroll of $500,000 or more are the most likely candidates, according to the MDCD.

While ESOPs may be employee owned, they usually have traditional management structures. That’s because building a business typically requires there to be one voice leading the way and somebody steering the ship, said Brandon Eisentrager, executive director of Jandernoa Entrepreneurial Mentoring.

“With decision making, it’s about trying to operate efficiently without falling apart,” Eisentrager said. “What is really the ceiling for a business model like (Bartertown)?”

While there is no “right way or wrong way” to start a business, clarity of vision and values are essential to any start-up, said Ari Weinzweig, co-founder of Ann Arbor-based Zingerman’s Deli and author of “A Lapsed Anarchist’s Approach to Building a Great Business.”

Without a clear vision and a core set of values, there are a thousand different ways to step forward, which could lead to the business losing momentum, he said.

“If the vision is clear, you’ve agreed to step forward in a way that gets toward your goals,” Weinzweig said.

In several ways, Cappelletti’s concept shares similarities with the $40 million Zingerman’s community of businesses, which includes a bakery, creamery, a coffee company and catering company. Zingerman’s started with a $20,000 second mortgage to open a deli delivering quality sandwiches and unparalleled customer service.

“(Cappelletti) is starting out in way like Zingerman’s did,” Weinzweig said. “Anybody that is doing anything meaningful is mostly hearing they shouldn’t do it. It’s rare that something unanimously great came out of something that everyone agreed upon. You’ve got to be willing to go against the current.”

Going against the current was never an issue for Cappelletti, who says he never cared about “making it.” He says the Bartertown system is more sustainable than the traditional restaurant business, especially those that claim to be sustainable and source food locally and use that as an excuse jack up prices to a level unattainable for the masses.

He says the problem is that other restaurants have to charge a premium because of what they spend on chic interiors and high-end menu options. This puts high quality, fresh food out of reach for a lot of people who can’t afford it.

On the other hand, Bartertown aimed to be accessible, charging between $8 and $12 for a meal. Call it farm-to-plate fare that’s affordable for the working class.

“The people who grow the food for us are working-class people, so why not feed the working class with the food they grow?” he said.

Support for solidarity

Peel away some of the layers of Bartertown’s story, and it’s obvious Cappelletti shares much in common with serial entrepreneurs. He admits to having zero interest in the long-term ownership of a restaurant. What drives him is developing concepts, getting them off the ground and creating a community of collectives he calls “Bartertownship.”

Before cooking up the Bartertown concept, Cappelletti earned his chops by working in the foodservice industry for more than a decade. His entry into the industry came the hard way after he dropped out of high school at age 16. Working in a restaurant seemed to be one of his only options, so he traveled and found restaurant jobs around the country.

He eventually landed in Grand Rapids, where he got gigs building the vegan and vegetarian menus at Stella’s Lounge and Brick Road Pizza Co.

However, the more he worked in the industry, the more questions he had.

“It just spawned into madness, and I started questioning everything,” he said. “I was always asking why: Why do I only get paid this much? Why is everything so black and white? Why is there only one way to do business?’”

As he chewed on those questions and railed against the ills of business as usual, he developed the early working model for Bartertown, a philosophy built on a mix of workplace democracy and guerilla entrepreneurism.

While Cappelletti knew he had a viable product and could execute on the diner concept, his challenge came in assembling the other pieces of the business, especially the funding.

“I had an idea and no money when I went to my landlord,” Cappelletti recalls. “I said, ‘If I can go in there and talk this guy into giving me six months free rent, and I can talk an investor into giving me $20,000, I can make this happen.’”

His unlikely propositions worked. The landlord agreed to the plan, and he found a private individual willing to loan the startup capital without taking any ownership stake in the business. Investor-owners are liable to put money in their pockets rather than put it back into the business, he said.

“I don’t want you here unless you’re a worker,” Cappelletti said.

Despite the challenges of trying what amounts to a controversial concept in West Michigan, Cappelletti remains positive that collective model works.

“I still believe in the concept, but I do realize I live in West Michigan,” he said. “I wake up at night and worry that a light bulb will go off in people’s heads and they’ll realize that ‘Bartertown is a bunch of commies — let’s not go there.’”

Bartertown generates about $40,000 a month in sales and pays for itself, he said, adding that the diner is nearly debt-free. Just don’t try to give Cappelletti the credit as an entrepreneur. He’s simply one of the workers, he said.

“One thing about working in a collective type atmosphere – that is alternative to a capitalistic environment – is that, in not a bad way, it kicks you off your pedestal,” he said. “You’re a worker just like everyone else.”

Although Cappelletti plans to step away from Bartertown, he wants to ensure the company’s viability to provide the workers with decent jobs. Cappelletti said he doesn’t want to be known for starting a company that failed, which is all the more reason to help his workers understand the intricacies of the business.

But both he and Zingerman’s co-founder Weinzweig acknowledge that failure is simply a part of doing business.

“We’ve all made mistakes and there’s no model that (totally) minimizes risk,” Weinzweig said. “Clearly, he has a dream and one that tries to benefit a broad spectrum of people in the community and environment, and that’s great.”